Pros & Cons Of Student Credit Cards

June 28th, 2010

There are certain benefits for students in having a credit card. But they do have special conditions and limitations attached – consequently these factors contribute to the drawbacks of these cards.

It is up to you to decide if the student credit card benefits outweigh the disadvantages.

As a student you are unlikely to have a high income, even though you could be working part time. Credit card providers are aware of this and take it into account, and that is the main reason student credit cards have a low income requirement, and usually cost less.

But it is still difficult for a student with no prior credit history to be approved for a credit card, and quite often there are additional conditions or requirements. You could be asked questions outside of the normal scope of credit card criteria. Some of the main student credit card benefits are outlined in the following section.

Benefits of student credit cards

Easy to apply for
Low or no income requirement for students
Lower credit limits on student credit cards – intended to assist in avoiding high debt whilst in school
Rewards offered on the credit card are geared towards student requirements

Drawbacks of student credit cards

You must be enrolled as a full-time student in an accredited school. If your school is not accredited or you don’t study full-time, you normally can’t apply for student credit cards
You may need a co-signatory to obtain a card. A few student credit cards don’t require a co-signatory, but many do. The co-signatory is normally a guardian or parent – who will be accountable for paying your debts if you default
Many student credit cards have a high interest rate. If you don’t have a credit rating, banks charge a high rate of interest to compensate the risk of possible losses
Banks that provide student credit cards may set conditions – for example, you may be required to open a savings or transaction account with them

Obviously there are student credit cards benefits but also some drawbacks. If you are thinking of applying for a student credit card, be sensible and don’t get carried away with spending. Make an effort to pay your outstanding balance every month, that way you will keep interest costs to a minimum. Failure to do this will result in high interest charges and fees. This is your opportunity to build your credit rating so seize the opportunity.